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Wal-Mart to appeal discrimination suit status

Wishes to deny class-action standing to a lawsuit alleging female employees were discriminated against in pay and promotions.

February 6 2007: 5:36 PM EST

NEW YORK (Reuters) -- Wal-Mart Stores Inc. said it plans to seek a reversal of Tuesday's decision by a federal appeals court to approve class-action status for women who claim the retailer was biased in pay and promotion.

Earlier in the day, the largest sexual discrimination lawsuit in U.S. history moved forward against Wal-Mart (Charts) when a federal appeals court approved class-action status for seven women who claim the retailer was biased in pay and promotions.

The plaintiffs estimate as many as 1.6 million women who have worked for Wal-Mart in its U.S. stores since 1998 could join the lawsuit. The number makes the group the largest ever to sue for gender discrimination.

"We hold that the district court acted within its broad discretion in concluding that it would be better to handle this case as a class action instead of clogging the federal courts with innumerable individual suits," Judge Harry Pregerson wrote for the United States Court of Appeals for the Ninth Circuit.

"Although the size of this class action is large, mere size does not render the case unmanageable," he said.

In the Wal-Mart case, the plaintiffs allege they were denied promotion opportunities, with some also saying they were sexually harassed or subject to sexist remarks.

The 2-1 ruling by the three-judge panel took no position on those claims, stressing the decision only affirmed a lower court ruling to certify the case, Dukes v. Wal-Mart, as a class action against the world's largest retailer.

In a class action, individuals bring a suit on behalf of a larger group that suffered similar harm.

"Class actions have been for four decades now the critical ingredient in employment discrimination litigation," said William Gould, a Stanford University emeritus professor of law.

"There is very little incentive for the defendants to change their practices unless a finding is made that there is a nexus between the named plaintiffs and the group," he said.

Bentonville, Arkansas-based Wal-Mart had argued it did not discriminate and that class-action status should be dismissed because the company grants its 3,400 U.S. stores a great deal of independence in their management.

In a dissent, 9th Circuit Court Judge Andrew Kleinfeld said the case should not be a class-action lawsuit.

"This case poses a considerable risk of enriching undeserving class members and counsel, but depriving thousands of women actually injured by sex discrimination of their just due," he wrote. "Plaintiffs' only evidence of sex discrimination is that around 2/3 of Wal-Mart employees are female, but only about 1/3 of its managers are female."

"Not everybody wants to be a Wal-Mart manager," Kleinfeld added. "Those women who want to be managers may find better opportunities elsewhere."

The decision by the San Francisco-based court will keep Wal-Mart on the defensive even if it appeals, said Brad Seligman, a lawyer for The Impact Fund, a nonprofit group in Berkeley, California representing the plaintiffs.

"Two courts now have ruled that Wal-Mart is going to have to face a jury," he said. "We fully expect Wal-Mart to keep appealing but we're very confident now that two courts have upheld this certification."

Donald Gher, chief investment officer of Coldstream Capital Management, which owns Wal-Mart stock, said the decision was a setback for the retailer and would cheer the company's critics in the U.S. labor movement.

"Clearly this is a big win for the tort lawyers and for the unions who are looking to cases like this to help bolster their ranks," he said.

But Gher noted that the lawsuit is far from over. "This could drag on for a very long time," he said.

Wal-mart is the world's largest retailer, and competes in the discount space with other stores such as Target (Charts) and Costco (Charts).